Why did Bear Stearns fail?

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โˆ™ 2008-12-23 19:07:18

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Bear Stearns' leverage (the money it borrowed) was so high (30x plus) that a "crisis of confidence" developed. Investors began withdrawing money from Bear and counter parties (their customers) stopped doing business with them - effectively their liquidity dried up. It was a classic Run on the Bank. Financial institutions foundations are based upon confidence and trust, so a healthy institution can become insolvent almost overnight. Due to the "run", Bear Stearns was forced to sell to JP Morgan at a fire sale price.

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โˆ™ 2008-12-23 19:07:18
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Q: Why did Bear Stearns fail?
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Related questions

When was Bear Stearns created?

Bear Stearns was created in 1923.

What is the ticker symbol for Bear Stearns?

The ticker symbol for the Bear Stearns is BSC and it is traded on the New York Stock Exchange.

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The 'S' stands for Stearns but there is no evidence of a connexion with the financial firm Bear Stearns - or is there??

Why did Bear Stearns shares fall so sharply in one year?

Bear Stearns was deeply affected by the subprime mortgage crisis. The subprime mortgage crisis is a result of the sharp rise in mortgage delinquencies and foreclosures.

What is the ticker symbol for the Bear Stearns Companies?

It used to be BSE, but they were bought out by JPMorgan Chase in 2008 and thier symbol is JPM.

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A 29-billion-dollar non-recourse loan was made to J.P. Morgan back with MBS. See Wikipedia "Bear Sterns" for details.

What is the birth name of Jeff Stearns?

Jeff Stearns's birth name is Jeffrey Allen Stearns.

What is the birth name of Taylor Stearns?

Taylor Stearns's birth name is Taylor Rae Stearns.

How did the failure of Bear Stearns affect stock prices?

In a simple sense, the failure of Bear Stearns had a negative effect on stock prices. When a major bank such as Bear Stearns (which had been in business since the great depression) fails, consumer confidence is lowered significantly. Investors lose confidence in the stock market as well. As they lose confidence, it is common to sell assets. As assets are sold, the entire market is flooded with supply. When the supply is very high and the demand is very low, stock prices are forced down.

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When did Stan Stearns die?

Stan Stearns died in 2012.

When was Stan Stearns born?

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